Your theory (amusingly, quaintly, but not endearingly) ignores the crooks who will bring the whole thing down. Can you honestly name a profession that rewards merit in the same league as wily avarice? The brain surgeon over the infomercial baron?
Or did I misconstrue what your definition of "elite" is?

One cannot find solutions by romanticizing the past. Currently our political system seems hopelessly and endlessly corrupt. Often the change that overthrows the established norms as in our current dysfunctional government is for the worse. The same change and turmoil offer the opportunity to repair and improve the system. Not without enduring much stress and harm before a better system can evolve. Watching Up with Chris Hayes as I type. I have outlined the evolution our society is undergoing in this essay. A Theory of Wealthhttp://www.elmwoodil.org/SEDrambles/SchockRespf.html

I tend to agree. So I get a good public school education, train in medicine until the age of 35, work 26 days out of 30, so that I should spend my money on myself? Instead, this article implies, that underlying the desire to educated ones children, raise them in safe neighborhoods with predominantly stable environments has an elitest notion about it.
I have only 3 things to do with the wealth I have created during my toil. 1) Educate and support my family, (including extended family). 2) Support someone else's family (give to the poor). 3) Spend on myself, consuming goods and services that are focused on me. I propose, #1 has no intent other than stated and is not the evil the media would have us believe it is.

The main problem with socialists like Hayes is they take a snapshot of the economy and then pretend that the economy remains fixed forever in the form shown in the snapshot.

The truth is that the US economy is dynamic, not static as socialists pretend. We have no dynasties of wealth. 85% of all millionaires got their wealth by growing a business. Only 3% inherited it. Wealth tends to last two generations. The wealthy today are not the descendents of the wealthy in the 1950’s.

And there is a lot of income mobility. Few of those in the lower deciles remain there more than a generation. Few of those in the top deciles remain their more than a generation.

Socialists like Hayes are stuck in the Middle Ages where the nobility held all of the political power and wealth came from land ownership. But even the nobility were much more fluid than socialists know. Nobility went bankrupt and became poor on a regular basis. Most nobility bought their title after earning the money to do so in business.

Socialists like Hayes are just neurotic: they don’t like the real world and so try to hide from it.

So, in your world, anyone left of center in the US is a "socialist"? Someone who advocates state control of the means of production & distribution of those goods & services? Exactly where does Mr. Hayes advocate any such policies in his writings? Where does he advocate state appropriation of mines, factories, electric supply, Wal-Mart, Costco, etc? Or anything even approaching that?
Quoting the writings of a writer of populist right-wing propaganda is not a great source. Anyone can selectively interpret data to fit their thesis: I'm a CPA, I should know about how numbers are subject to manipulation. The good doctor appears to be more concerned about appeasing a choir of the converted & selling books to them than producing scholarly articles on the subject that his academic peers can criticise.
I'm sure that the scions of the Rockefellers, Carnegies. et al would be interested to know that the value of the stock, land & landhold improvements bequeathed to them will be rendered worthless within a couple of generations by some invisible hand of wealth re-distribution. Because the Bush-era tax cuts made sure that estate taxes (or "death taxes" as the manipulators of language on the right love to call such taxes) are reduced to almost nothing. So federal appropriation is hardly a factor; I suppose drink & profligate living must be the explanation for losing billions.

The issue with meritocracy is that it is not stable. It works well when everyone starts from roughly the same spot (e.g. at a new frontier). It works less well within the context of long-established power structures, yet it is such power structures that meritocracy, starting at the frontier, tends to create.

The problem is that any sufficiently fungible advantage is self-reinforcing – a given advantage V can be used by an entity to secure further advantages in competition against an otherwise identical entity lacking V. In the next round, the first entity starts with even more advantages and the competition is made even easier.

For meritocracy (and markets) to work, therefore, long-term accumulation of advantages should be highly restricted. Fortunately, all humans are faced with an unavoidable 'dis-accumulating' event – death. Unfortunately, societies have worked on ways to prevent death's dis-accumulating effect since at least the invention of agriculture. Some of these ways (castes, hereditary political power) we have, for good reason, abandoned. Other methods (inheritance of economic assets, business incorporation) remain in full effect.

Hayes needs a serious education in reality, not just economics. He needs to read the works of Dr. Thomas Stanley. His latest success was “The Millionaire Next Door.” Stanley made a career of studying and writing about millionaires. In one of his books he shows that only about 10% of millionaires pass on to their children the values of hard work and frugality that made them millionaires. As a result, the third generation of 90% of millionaires is usually broke. That doesn’t sound like a permanent elite class.

Isn't Stanley's thing frugal wealth accumulation though? Net worth as peace of mind, as opposed to net worth as exercise of power? The millionaires he focuses on are more chain-of-laundromats or RV-dealership owners than white shoe firm partners, or senior executives, or ambassadors, or whatever else. Making good in the boonies is interesting from a self-help perspective, but it's not at all what Hayes is talking about. Wealth accumulation through slow and steady frugality is equivalent to a voluntary non-exercise of power. It is little wonder that their kids get no further advantages besides being a bit spoiled and driving a nice car/getting laid more in high school.

Stanley didn't limit his study to any particular type of millionaire, but he does focus on the majority of millionaires because that would make sense.

Wealth gives power only if the wealthy use it to buy power from politicians. For that kind of power look to corporations and their campaign contributions. Most millionaires don't contribute to political campaigns.

"Culture" tends to refer to a dominant collection of preferences and ways of pursuing those preferences. No one WANTS to have children out of wedlock – most instances are the result of being denied sufficient family planning education and resources. One might as well accuse recent urban migrants in the developing of world of having a "culture" of not using indoor plumbing...

No one WANTS to have children out of wedlock
Are you sure about that?
In some US communities and families, it's a badge of honor.
Some girls have been known to trap men, especially rich ones such as sports and entertaiment stars.

That figure is much higher for the poor, closer to 90%. According to the Census Bureau, the two groups of households that contribute the most to poverty are immigrants and single mother households. Those are probably the main causes of growing inequality in the US.

Bristol's mum's politics/religion would have take abortion off the table (and made sufficient sex-ed highly unlikely), while Edwards's mistress was a lot less powerful than Edwards, in-keeping with the point I was making.

In addition, aristocrats were not rich because they EARNT their riches, they were rich because they extracted wealth from those below them. "Entitlement" does not even begin to cover what was outright theft.

But the labels on the U.S. Olympic team's clothing in the Olympics opening ceremony on July 27 will say "made in China," reports ABC News.

The 2012 Olympic Opening ceremony will be a chance for Team USA to show off the design skills of an American, Ralph Lauren, who also designed USA opening uniforms for the 2008 Olympics in China. Lauren's Olympic fashion features white pants and skirts, blue bazers and berets, and red ties.

Cynics might note that Chinese goods often cost less. But the men's blazers for Team USA cost $795, and the women's, $598, ABC says. The ties cost $125, the belts $85, and the berets $55.
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And R.A. says there's no inflation.

In every one of these areas, there is enormous potential for disruptive technological innovation, which allows partial automation, eliminates barriers to entry, provides alternative tools for finding, processing & acting upon information, and which largely eliminates rent seeking.

1) We need open online & mobile financial platforms (there are many decent but early stage open source platforms - with Bitcoin doing technologically impressive stuff). Online markets could be open to all, and pretty GUIs can allow even averagely numerate people & businesses to competently manage their finances without intermediation.

2) For legal rent cutting, we really need deep reform. The size of the legal system must be shrunk to human understandable size. Pedagogical online accounts of every aspect of the legal system must be available online - a wiki style movement which would deserve public subsidy (fair & efficient access to the law is one of the foremost functions of government). We really should move towards online courts for evidence submission, statement submission, debating points of law, etc - and for efficiently processing appeals without waste of time.

3) Autonomous robotic surgery (for body opperations and for dental procedures) is half the solution. We all ready have some prototype systems - and we'll be there in 15 to 25 years. Everyone can have access to cheap surgical interventions, performed more quickly and with lower risk (infection, complication, error, etc) than any human surgeon could achieve. No shortages, no rationing and no inconvenient hours for anyone with cash.

Diagnosis, scheduling of further tests and prescription of interventions will increasingly be handled by software - with nursing intermediaries for the less computer literate. Pharmacy is already obsolete - computer prescription systems do a better job of identifying likely conflicts or inappropriate dose levels, etc. We just need deregulation.

4) This is the area where optimism is least justified. Exercising influence, carrying exclusive power over important scarce resources and technologies, achieving useful regulatory changes and leading profitable business is an area where there is no obvious reason rents should fall or inequality improve. That said, modern communication technologies may cause broad outsourcing, with business units becoming smaller, markets more competitive & less exclusive and with rents driven out. Information technologies may allow shareholders to become more active in every day decisions & investment decisions, driving out manager influence & rent extraction. Etc. Who knows?

On the first 3 points at least, there are sound grounds for real optimism.

Don't forget public servants. No technological breakthrough is needed. If we just got the ability to hire and fire them like regular people (AKA the plebe) a lot of rent-seeking would disappear (and service levels would skyrocket).

I agree with you except for the business execs. The other categories use the power of government to restrict entry into their professions, or like bankers, use the power of the state to create money ex nihilo.

Rent seekers are generally those who use the power of the state to increase their wealth at the expense of others rather than compete in the market place and earn an honest profit. The defense industry is another good example.

CEO's don't do any of that if they're not in one of those rent seeking industries. They compete with other execs for the position of CEO and don't get any money from the state or through state privileges, such as licensing.

Very few industries are very competitive - and most companies have very weak shareholder influence over management.

It is quite normal in legacy industries - and even in some new ones - for executives to extract very high remuneration at the expense of shareholders and workers.

That's rent seeking.

For sure, business is also very active in innovation and real wealth creation - but that isn't the sole activity from which executives draw their incomes. In so many firms, so much of business innovation (and also decision making & marketing decisions) is made at more junior levels - but the top suits with the big guns extract what they can (which is typically the lion's share).

This certainly doesn't merit government intervention - but we should welcome any technological innovations which would empower shareholders to link up with more junior employees and undermine the rent seeking power of executives. Communication technologies could facilitate far greater openness & transparency - but the social changes & competition implications make such developments highly uncertain.

Businesses face competition even in a duopoly, of which there are very few.

"... most companies have very weak shareholder influence over management..."

That's the way it's supposed to be. Shareholders give up control over operations in exchange for limited liability. If shareholders want absolute control, they need to take the company private and give up limited liability.

"It is quite normal in legacy industries - and even in some new ones - for executives to extract very high remuneration at the expense of shareholders and workers."

That's not possible without approval of the board of directors. And if shareholders don't like the pay the board give execs, they can replace them through a vote.

"...innovation (and also decision making & marketing decisions) is made at more junior levels - but the top suits with the big guns extract what they can..."

Clearly, you have a very poor idea of the role of management. Most Americans do, and I think that is because they don't understand what management does. I think if you read some Austrian works on entrepreneurship and management you would have a better view of management.

Instead of board members being suckers for slick talking execs, I think it is more reasonable to see board members as intelligent and experienced people who value good managers and pay what they need to pay to get good ones.

Personally, I think good CEO's are as rare as good NFL coaches or good movie directors. That's why they earn the big bucks.

"we should welcome any technological innovations which would empower shareholders to link up with more junior employees..."

Shareholders would have to give up limited liability before they could do that.

The best thing shareholders can do to discipline CEO's is to sell their stock. When share prices fall, board members get nervous and start looking into the causes. That's when CEO's get the boot.

The rich live in neighbourhood enclaves and social circles with median incomes well above those of the cities in which they reside,

Rich, successful people marry other rich, successful people and have talented children that enjoy every advantage: good schools, private tutors and test prep, talented peers and, eventually, excellent professional connections.

Nothing new here.

Does Mr. Hayes address that since 1980, the Berlin Wall fell, Asia and recently China opened up to manufacturing - adding more workers to the global workforce?

a substantial, ongoing concentration in its gains the result of which is soaring inequality.

I can relate.
I know people who have cell phones, cableTV, high-speed internet, newer cars than me, newer furniture than me, even though I make earn the same or a bit more than they do.

Maybe it all boils down to people making bad choices.
People being told they have to have certain items, no matter their income.

Dear Mr. Avent,
thanks for your insghtful blog post. However, I wonder whether economists aren't a bit too biased toward technology-based explanations. As someone who works in Comparative Politics, I find it striking how economists focus only on the general trend of globalization (capital mobility v. labor immobility), while mostly ignoring the strong variation across OECD countries.
Apparantly, globalization did not sweep away unions in all countries. Although they might be weaker nowadays in Sweden or Germany, these are still countries with very powerful labor union which engage in collective bargaining. This does not seem to lead to uncompetitively high wages, at least given that these countries have very strong export-oriented economies. US institutions and policies played a major role in the decline of organized labor or increased inequality.
I don't want to say that it's all about labor unions and policies. Globalization (in particular reduced transport/transaction costs) is a major transforming force of modern societies. But insights from Comparative Politics shouldn't be ignored, especially if economists want to take institutions seriously.
So, perhaps my main point is: The extreme inequality in chances as well as outcomes that characterizes the US nowadays is not just the result of forces that are beyond political control.

The inequality in the US is not extreme. It's at the high end for the 20th century, but it has fluctuated a lot. The interesting thing is that those who insist that inequality is a problem see nothing but tax rates as the cause of inequality. But inequality has fluctuated when tax rates stayed the same.

Tax rates have very little to do with inequality, except in the case where lower rates encourage the wealthy to take more of their wealth in current income instead of postponing it through capital gains.

The major cause of inequality in the world is corruption in government through state owned industry. In the developed world the major cause is age: older people earn more than younger people. Family size makes a huge difference, too. Families with two parents both working earn more than households headed by single mothers. And immigration is a big factor in that it increases the number of poor people.

In fairness, giving a $120 billion in mortgage tax deduction to people with sufficiently large incomes to qualify, and with sufficiently large mortgages as to make a substantial claim, constitutes a massive income transfer to the richest 10-20%.

The tax and benefit system is very important for America's income distribution - and for fairness. Mortgage tax deductability must go.

The rest of the points you make are valid - and prevalent technologies and balance of scarcity obviously are obviously extremely important. But we can't ignore some of the more perverse parts of the US tax system. Tax is also implicated somewhat in inequality.

I agree with your point about mortgage interest deductions, but consider also the progressive income tax system, which takes in far more than the mortgage deduction gives the rich. The top 20% in income pay about 80% of the income tax.

It probably is desirable that the richest 20% pay 80% of income tax - especially if the state is most engaged in activities like public infrastructure, public education, poverty relief and civil institutions, maintaining the kind of ecosystem that allows rich people to be rich.

After all, crimes, kidnappings, murders, lootings, low skill levels, unsophisticated consumers, uncompetitive infrastructure, lack of innovation and market weakness would all devastate the top of America's income distribution (far more so than the bottom 20% - with far less to lose).

Broadly, it seems fair that the biggest beneficiaries pay the biggest proportion of their income.

That said, there must be far more focus on efficiency, reducing the size of government and reducing marginal rates.

Government activity, as far as it continues, should focus on progressive activity (no industrial subsidies, no special tax breaks, no middle class welfare, no universal hand outs for the elderly, etc).

And also to allow for lower marginal tax rates, government should seek both allocative & operational efficiency: completely free trade & development assistance instead of the military; public research instead of military research; open migration with Canada, Australia, New Zealand, Japan, South Korea, Taiwan & Western Europe; more efficient court systems; online government; deep outsourcing of government activity; public "open source" pharmacology funding instead of agricultural subsidies, etc.

But broadly, the burden of taxation should still fall primarily on the richest and those with high incomes - whilst spending should seek to be as progressive as pragmatically possible.

Government can't and shouldn't try to create an equality utopia - but in every aspect, the taxation and expenditure which is economically and socially necessary (rather less than we have today) should seek to be strongly progressive.

If you read actual studies on this topic (such as Picketty and Saez) inequality in the US has grown dramatically since the 1960s and 70s, and tax reductions in the Reagan and Bush years definitely contributed. Of course there's more to inequality than lower taxes, but the idea that taxes won't have an effect on inequality makes no sense.

As for your "major causes," you seem to have made them up. In fact, most studies of inequality tend to show that the increase in US inequality is due to the gap between the extremely wealthy and middle class (10% vs 50%). (see Lemieux for example). There are just so many glaring errors in these comments that I hardly know where to start--such as your earlier claim that inequality isn't a problem if it doesn't last more than two generations of inept progeny.

Quote: "Many of the economy's fundamental weaknesses are at least quasi-cyclical; they'd either disappear or become dramatically more tractable given a couple years with an unemployment rate close to normal levels."

Isn't it a bit of circular logic? It looks like one of the fundamental weaknesses of the American economy in this day and age is its inability to generate booming employment growth after a deep and protracted recession. This publication has been on record many times explaining that high growth rates (and appendant job creation) usually, if not systematically, follow tough recessions. Almost 5 years after the onset of the downturn, unemployment is stubbornly stuck above 8%.

The current situation is either a complete outlier, or a sign that indeed something big has shifted.

For what it is worth, I think the problems of most OECD's countries would "become dramatically more tractable" if unemployment could return to, say, less than 7% for a couple of years. Southern Europe in particular would be orders of magnitude better off with single-digit unemployment. In this respect, America is far from isolated.

"What makes countries end up in persistent and permanent poverty? Why is Mexico much poorer than the United States? Why is Latin America so fundamentally different to North America? How is it possible that an average American is 40 times richer than an average Sierra Leonean? Is it climate, geography, culture, or could it be the ignorance of domestic leaders? Acemoglu and Robinson suggest it’s none of these – rather, the real reason behind the poverty trap and significant between-nation differences lies in the role of political and economic institutions. Politics and the formation of political institutions take centre stage in their book, which formulates the thesis that only within an inclusive political system is it possible for nations to achieve prosperity. The opposite scenario will occur under extractive political institutions where wealth will be accumulated within a narrow ruling elite which will aim to preserve its power thus sentencing a nation to persistent poverty."

Acemoglu and Robinson offer real economics, not the lies and half-truths of Marxism like Hayes offers.

I'm not sure what "lies and half-truths of Marxism" you are referring to, but if you bothered to read Hayes's book, you'd find that one of the failures of "meritocracy" he describes could be summed up quite well with your quote: "wealth will be accumulated within a narrow ruling elite which will aim to preserve its power thus sentencing a nation to persistent poverty".

I couldn't write a book that included all of Marx's half-truths and lies; they're too numerous. But the one that relates to this post is the lie that free markets lead to greater inequality.

In fact, one reason more economists didn't embrace Marxism was Marx's prediction that the rich would grow richer until workers were starving, and then socialism would explode in the industrial West. Instead, workers grew continually wealthier after Marx's prediction. Honest people abandoned Marxism as a result.

I don't know which book of Hayek's you refer to (I have read most of them), but if he wrote something like he was referring to corrupt governments that steal from the people as those described in "How Nations Fail" or he was referring to the elite in a socialist society. Hayek never wrote anything like that about free market economies.

WOI mentioned Hayes, the author of the book reviewed by R.A., not Hayek.
I second the recommendation of Acemoglu and Robinson, it's one of the most well-written and readable political economy books I've gone through in years.

The difference between what Hayes wrote and what Acemoglu and Robinson wrote is striking. Hayes claims it will happen in a free market, as did Marx. It has never happened in a free market because it can't.

Competition will always prevent accumulation by the wealthy like what happens in poor unless the wealthy are able to buy power from politicians to prevent it. Of course, then you no longer have a free market; you have a corrupt government dishing out favors to rich guys.

Acemoglu and Robinson write that a powerful elite uses their political power to steal from everyone else. North and the New Institutional School call that a traditional closed economy. The ruler allows the elite to steal from the masses in exchange for their loyalty. It is the oldest and most robust form of government in history.

I have a very hard time understanding how socialism thrives today when it has failed everywhere it has been tried. Only the very soft socialism of Western Europe has muddled through and it's failing before our eyes.

Yet no matter how many times it fails; no matter how many people starve or how many lives are destroyed, socialism only grows more popular.

Hayes is a socialist. He thinks socialism works. Why should anyone pay attention to what he writes? Socialists have even less of a clue as to how economies work than does mainstream econ.

The problem with the US is lack of investment in business. The real estate and financial bubbles sustained the US from 2000 to 2007. Growing economies invest in new technologies and growing businesses. Third world economies invest in real estate, speculate in stock markets or send their money overseas. The best jobs are in government.

The US now has a third world mentality. It can live off borrowing from the Chinese maybe another decade, then it's over, just like it's over for the PIIGS, France and the Netherlands.

Either the US reduces taxes and regulations as well as healthcare costs or we decline slowly. Hayes needs to learn the Solow growth model and some real economics. I can't believe he is still spouting Marx after all these years. Even worse, I can't believe a writer for the Economist even pays attention. He won't give Austrian economics a glance, but he'll show immense respect for an avowed Marxist.

Either the US reduces taxes and regulations as well as healthcare costs or we decline slowly.

Taxes at the federal level is not the problem.
3 California cities going bankrupt show it's a problem at the local level.

The Cleveland-Cuyahoga County Port Authority wants to boost its property tax by more than 400 percent to shore up the Cuyahoga River, provide better pedestrian access to the lakefront and support maritime operations at the downtown docks.

If the replacement tax passes, the bill for the owner of a $100,000 home would jump from $3.50 to about $20.

The main problem with taxation at the national level is with international trade. We could afford high taxes when Europe had higher taxes. Europe is our major trading partner. But Europe has reduced corporate taxes and put US exporters at a major disadvantage.

Another factually inaccurate remark. While some European countries have lower official corporate tax rates, US companies on average pay lower taxes (and especially multinationals). If you've ever worked for a large company, you also know that it's easy to shift profits to the country you operate in with the lowest taxes.

The problem here is that almost no matter what you do, there will be problems somewhere in the economy.

If you in contrast to postwar America instead adopt a policy which enforces an 'equality of outcomes', then social productivity gets hit hard due to people in the non-skilled working classes being incentivised to just fall back on the social safety net.

This is very interesting. In effect the argument is that we do live in a meritocracy but we have arranged matters so that merit can be purchased for our offspring. We therefore simultaneously live in a meritocracy AND something else (oligarchy? feudal?).

If you really want to be fair about it then you have to do some drastic an unpalatable things, like 100% inheritance tax.

don't property rights count for everything? wasn't USA founded on the fundamental rights of life, liberty, and property? the government's job is to protect those unalienable rights. that is what classical liberalism is all about. it is not the government's job to take from us the fruits of our labor, which we wish to pass to our children, to give to others. that is immoral and certainly not what our country was based on.

Sorry Ob, but Omri is spot on IMO - 100% estate tax is the only ethical and practical solution to the problem.

Many of us have no problem with anyone earning/accumulating all he or she can through the lawful employment of "superior skill, foresight and industry", to borrow from the language of the law. It's those who have wealth and influence but haven’t earned it by that method that is the stuff of violent revolution. IMO, that’s where this train is headed.

Your children can make their own ways in the world; they don't need and/or deserve (and society can't tolerate) your influencing the outcome from your extravagantly monumental grave. The emergence of an hereditary ruling elite is IMO the very worst outcome one could imagine, judging by any reasonable set of criteria. In many respects, we’re already there. Prompt action is required.

Besides, a 100% estate tax generates like $200Bil a year in tax revenue - we need the dough - bad.

Property rights only make sense when one cannot own what one has not earnt. Failing to tax the RECEIPT of gifts and inheritances at 100% is about the single biggest thing one can do to undermine the free market (since it is not according to market principles that gifts and inheritances are made).

It is not the job of the government to take from you the fruits of your labour. It is the job of the government to prevent people from taking the fruits of labour THAT WAS NOT THEIRS, regardless of the wishes of the people whose labour it was. Producing something gives you the right to consume it. It does not give you the right to screw the entire economic system via non-market transactions and lopsided accumulation.

No. As in our Declaration, people have certain unalienable rights. Being able to accumulate property and wealth and pass that on to our children is one of those rights that the government should have no say or involvement in at all. If I have purchased a house or a farm or an office building, and I want to pass it on to my children I should be able to do that without the strong arm of the federal government interfering in my decisions. That is not the government's job. It has absolutely no business doing that. Not only is it improper but it is immoral--to have everything STOLEN from you by the government when you worked hard to provide many of these fruits of your labor to your children.

I'm not really sure what you mean. What free market principles are you talking about? Free markets are based on freedom. Freedom means you can do whatever you want with your accumulations and wealth, without fear that the government is going to steal it from you. Property rights are sacred. These kinds of confiscatory taxes are part of the problem, certainly not the solution. High inheritance taxes are the centerpiece of socialist political and economic thought. Inheritance taxes are antithetical to human freedom and liberty.

Jefferson changed the 200-year old formula from life, liberty and property to life, liberty and the pursuit of happiness in order to make it more inclusive, not to get rid of the right of property.

The church scholars of Salamanca, Spain came up with the formula in the 16th century, claiming that the state should be limited to protecting the life, liberty an property of its citizens. Locke picked up on the idea about a century later. Jefferson merely expanded the right, but he definitely had property in mind when he changed the formula to "happiness."

Jefferson's change from "property" to "pursuit of happiness" was intentional. If he'd wanted to exalt property rights over all, he would have done kept the traditional formulation. (There is, after all, a reason we refer to the context as a revolution.)

So, why do you insist on limiting the Founders' vision by emphasizing "property" at the expense of everything that's encompassed by "pursuit of happiness"? I'm not saying that Jefferson wanted to get rid of property rights ... I'm saying that you're shortchanging him by implying that the USA was founded on a veneration of property rights.

One remains entirely free to spend the money one has earnt in whatever way one wants. What needs strong limits is one's ability to acquire money one HAS NOT earnt. Depriving someone of something he or she has not earnt can never be theft. The limits are not on the people making the gift, the limits are on the people receiving them. Same way a judge cannot receive gifts from the litigating parties, for instance, or a political candidate cannot accept unlimited donations from a single person.

As to the free market, one of its key principles is that of free competition – so no privileging of your kids, your friends, your tribe, etc. Inheritance is nepotism. Nepotism is one of the things the free market was conceived to defeat. Anyone who cares about freedom and prosperity would never privilege anyone in his or her inheritance over anyone else. For those cases where the dead person was anti-free competition and anti-equality of opportunity, society is more than justified to step in and prevent the intended beneficiaries from receiving the grossly distortionary benefits.

"But that could all be swept away. As machines—or networks of moderately skilled or unskilled workers—become better at doing the cognitive tasks for which individuals now earn a premium, that premium will disappear, and the balance of labour-market power may shift again."

This would make me worry that the balance may shift away from labor, high knowledge or not, entirely and instead towards social networks and incumbent actors. A world in which any form of merit no longer matters and it's only who you know would be a very a very depressing place. Lets just hope this doesn't happen.